Prime rent for office space in central Manchester will reach £33.50/sq ft by the end of 2015 and peak at £35/sq ft in 2018, according to the latest net stock absorption report by Colliers International.
The increase in rental levels is being driven by the ongoing shortage of high-quality office space in Manchester city centre as demand from potential occupiers continues to outstrip supply.
Available space fell by 38% in 2014 with take-up reaching a record level as 1.4m sq ft of deals were transacted in the year.
The strong level of transactions was driven primarily by a requirement for 20,000 sq ft-plus units with 10 such deals in 2014 compared to three in 2013.
The overall lack of prime space persisted despite the completion of Argent's 280,000 sq ft One St Peter's Square. KPMG has taken 75,000 sq ft, alongside law firm DLA Piper who reportedly paid around £32/sq ft for 45,000 sq ft.
The NSA research warned that the imbalance of supply vs demand will persist in 2015 and into 2016-2017 as little new Grade A space becomes available, with a consequent increase in headline rental levels. Rent levels are then expected to level off as offices such as Mosley Street Venture's Two St Peter's Square, Ask's 101 Embankment and English Cities Fund's One New Bailey are completed.
Nick Nelson, associate director of national offices at Colliers International in Manchester, said: "Delivery of new space will be negligible during 2015, which will increase the downward pressure on Grade A vacancy. A situation where there is very little new Grade A supply available is now anticipated to exist by the end of 2015, persisting well into 2016/17.
"We anticipate prime rents reaching £33.50 per sq ft by the end of 2015 and peaking at £35.00 per sq ft in 2018."